Medical debt can be sent to a collection agency like any other debt. However, if it is owed to a non-profit hospital, they may be required to provide financial assistance before it is sent to the collection agency. The protections of the Affordable Care Act give patients of non-profit hospitals time to apply for financial assistance before "extraordinary collection measures" are taken. Some hospitals and medical groups have funds set aside for people who do not qualify for other types of assistance.
An unpaid medical collection account will almost certainly have a negative impact on your credit score, even if you are sending in monthly payments. Insurance companies often send an Explanation of Benefits (EOB) before you receive the bill from the provider. It is a common myth that if you are paying a hospital provider what you can afford, they cannot turn it over to collections. You, or someone working on your behalf, should contact the doctor, hospital or collection agency to negotiate a mutually agreed upon amount.
For former patients who owe money, Antico said, these debt buyers may be preferable to being harassed by the hospitals themselves, since debt buyers have to collect only a fraction of the debt to make a profit. After trying to collect on their own for a while, some hospitals and doctors' offices sell their debt to debt buyers, who pay pennies on the dollar for every dollar owed, and then strive to simply collect more than they paid. Some hospitals - the Cleveland Clinic among them - have agreements with certain banks that will spread the payments over two or three years without interest, as long as the payments are made on time. I asked him if he thought hospitals might be selling their debt because collecting medical debt might be seen as morally distasteful.
Explain your situation to a hospital or healthcare provider in the hope of reaching a settlement you can afford. Debt often comes from out-of-network doctors that people thought were in-network, hospital stays or ambulance rides. Experts advise starting this settlement process as soon as possible, preferably before the debt is turned over to a collection company, which may not be as motivated to settle as the doctor or hospital. If you are certain that you should be reimbursed, or that the doctor or hospital should be paid by your healthcare provider, file an appeal in time, as most insurers limit the time you have to dispute a benefit.
Why hospitals sell their debts is a matter of debate, but several consumer lawyers speculate that it is because hospitals do not want their good name to be associated with aggressive debt collection tactics. Despite the perception to the contrary, hospitals are businesses and are not obliged to grant financing to customers (patients) who cannot pay the bill in full.